How to Pick Stocks

In one of my previous posts, I wrote about the investment strategy of Peter Lynch, an American fund manager. Some of you are probably interested in it, and want to learn more.

I recently bought the stocks of Padini, an apparel maker. I made the purchase based on the guidelines given by Lynch. Now I will tell you how I came up with this decision:

• In the past few years, Padini’s revenue has been growing at about 9% annually, and profit has been growing at more than 20% annually.
• P/E ratio was about 9.5, which wasn’t too expensive. (According to Lynch, if the profit growth doubles the P/E ratio, the stock is a bargain.)
• The company has more cash than debt.
• PADINI is not a hot stock. (Hot stocks tend to be riskier.)
• We buy clothes even when economy is bad.

Of course, I am not an investment guru; I may be wrong. The picture is not all rosy. For one, Padini’s brands are relatively weak. Uniqlo, the Japan-based apparel maker, has a much stronger brand. Then again, Uniqlo may not pose a serious threat. Clothes sold by Uniqlo are often too warm for Malaysian climate.

Note:

P/E ratio is short for Price/Earning ratio. We compute P/E ratio by dividing the stock price with earning per share.

My Hong Kong Trip (VI)

Recycling in Hong King

Recycle bins are common sight in Hong Kong. Here are some…

In Ocean Park…

In Hong Kong Convention & Exhibition Center, Wanchai…

Foreigners in Hong Kong

Before visiting Hong Kong, I already knew that there were many Filipino workers in the Chinese territory. It turned out that there were plenty of Indonesians too.

While Filipinos congregate in Central on Sunday, Indonesians do so in Causeway Bay, not far from my hotel. I later learned that Thais meet at Tsim Sha Tsui.

Indonesians in Causeway Bay…

Hong Kong Girls

I didn’t see many pretty girls in Hong Kong. Which came as a surprise, given that the SAR was an affluent and trendy city.

Occasionally I came across pretty girls. But chances were, they were Mandarin speakers…

No Clear Sky

As an avid photographer, I like to take landscape photos with blue sky. Unfortunately, during my 8-day trip to Hong Kong, the sky was almost always shrouded in haze. The wind had blown the polluted air from Mainland China to the SAR.

Colonial Era Place Names

Unlike Malaysian Government who wasted no time to rename most of the streets after independence, Hong Kong still retains many of the colonial era place names. We came across such names like Jordan, Nathan Rd, Wellington St, Shelter St...

I suspect Hongkongese miss the days when they were ruled by the Brits, especially when the two SAR chiefs, Tung Chee Hwa and Donald Tsang, disappoint them.

One Up on KLSE

I am learning to invest in stock market, and I have just finished reading this book:

One Up on Wall Street, by Peter Lynch

Lynch is a former fund manager. He shares many similarities with Warren Buffet – both of them are long term investors who ignore short-term market fluctuation; both of them invest in companies, not in the market.

However, Lynch differs from Buffet in some other ways. Buffet likes to invest in companies with durable competitive advantages. Such companies would have very good track record; they would have been profitable for many years. The problem is: stocks of such companies won’t come cheap.

Lynch, on the other hand, groups companies into 6 categories – slow growers, stalwarts, fast growers, cyclicals, turnarounds, and asset plays. He has devised a strategy for each of these categories.

Lynch likens a potential fast grower to Harrison Ford. The Hollywood superstar was a carpenter before he joined the cast of Star Wars. A stalwart, on the other hand, is like a lawyer. A lawyer’s wagers, while high, don’t come close to Ford’s income.

In his book, Lynch guides on how to pick a winner, when to buy, when to sell etc…

After reading my post up to here, some of you are probably getting excited, and want to get a copy of this book. Those who have read this book may want to resign from your job and become a full-time investor. But let’s be realistic, can you become a millionaire by investing in stocks?

Let’s say your initial capital is RM10,000, and you invest in just one security. (Few people put all their eggs in one basket!) Within five years, the price of this stock rises by 10-fold. Your investment now values at RM100,000 – not bad at all! Even so, you’re still just a 0.1 millionaire.

I have invested in a few stocks, but I still can’t retire, yet…

My Hong Kong Trip (V)

Eating in Hong Kong

Hong Kong is foodies’ haven. During my visit to the SAR, we had a meal in the famous Yung Kee Restaurant (鏞記酒家).

Yung Kee is most famous for its roasted geese. Unfortunately, I haven’t got the picture to show here. I am not that kind of people who would say, “Don’t eat! Let me take some pictures and upload to Facebook.”

Anyway, I managed to snap a few pictures before we picked up our chopsticks…

Outside the kitchen…

Preserved eggs…

Roasted meat rice…

Yung Kee Restaurant is located at:

32-40 Wellington Street, Central, Hong Kong

Hong Kong is also famous for, what else, dim sum. And we also had a dim sum meal during our trip. Here is one picture…

But wait a minute… These are not real dim sum, but fridge magnets! We bought a few as souvenirs. I took picture after we returned to Singapore…

Free, with Terms & Conditions

Blogger SK wrote about a promotion campaign of KFC in Malaysia. The fast food giant offered free Zinger burgers for a month. Within a few hours after the promotion started, however, KFC had to discontinue the offer ‘due to overwhelming response’.

Is it possible for a business to offer some free goods or service, and still make money?

Well, AirAsia, the budget airline, has been giving away ‘free seats’ from time to time. But the passengers have to pay for everything else, from ‘convenience fee’ to baggage free to check-in fee.

In Japan, there is this kind of eateries called tachi-soba, literally ‘standing soba’. Patrons of these eateries are required to stand while having their meal. No seats are provided. See pictures below…

Source

Now, combining the concepts of AirAsia and tachi-soba, I am thinking of starting a restaurant which serves free noodles, but with terms and conditions…

• Noodle – free
• Service charge – RM5
• Bowl – RM1 (you can bring your own bowl)
• Chopsticks + spoon – RM1 (you can bring your own chopsticks)
• Drinks – various prices
• Chair – RM1 (you may stand)
• Use of restroom – RM1

On the other hand, I would increase my revenue by selling ads space in the shop…

So, anybody want to join my new venture?

My Hong Kong Trip (IV)

Ngong Ping Village

In my last post, I wrote about the cable car ride from Tung Chung to Ngong Ping.

After getting off the cable car, we arrived at Ngong Ping Village. This was a theme village with traditional Chinese architecture. There were shops selling souvenirs and eateries. Ngong Ping Village was very touristy, but I must say that it was quite interesting.

The square...

Bubbles!

Distances to the world, with the Giant Buddha at the background...

Po Lin Monastery

Next to Ngong Ping Village was Po Lin Monastery (寶蓮禪寺). The monastery was famous for the Giant Buddha, the world’s largest outdoor bronze statue. The Giant Buddha sat atop a hill. Surrounding the statue was several smaller statues in the shape of fairies (?) A stair of 268 steps led one to the complex. If you don’t feel like making the climb, you can still appreciate the view from below.

268 steps...

Fairies?

The Buddha & the flags...

Joss sticks...

My Hong Kong Trip (III)

Ngong Ping 360

On the second day of my Hong Kong trip, we went to experience Ngong Ping 360 (昂坪360) at Lantau Island (大嶼山).

Ngong Ping 360 consisted of 2 parts – the first of which was the cable car journey which connects Tung Chung (東湧) to Ngong Ping. When we reached Tung Chung cable car station, there was already a long queue. We waited for half an hour to purchase the tickets, and another half an hour to board the car. Many of the tourists came from Mainland China. Hong Kong was hugely popular among Mainlanders. We would see a lot more Mainland tourists in the subsequent days.

Our patience paid off. The cable car ride was exhilarating. There were two types of cabins – regular and Crystal. Crystal Cabin had glass bottom, which allowed one to see the landscape beneath. As you might have expected, the fare for Crystal Cabin was higher.

We often perceive Hong Kong as a cosmopolitan city, but Lantau Island was heavily forested…

The crowd at Tung Chung…

The ride…

Hong Kong International Airport is at the background…

Crystal Cabin, with glass bottom…

My Hong Kong Trip (II)

Ding Ding

One of the more interesting modes of transport in Hong Kong is tram.

Known as Ding Ding (叮叮) by Hongkongese for the sound they make, trams run only in North Hong Kong Island. Ding Ding is slower than bus, and must stop for traffic light. In a city with highly efficient MTR (Mass Transit Rail) system, it is hard to imagine that Ding Ding survives into 21^st century.

A trip on Ding Ding costs HK$2.30 for adults, or HK$1.20 for children under 12, regardless of distance. Ding Ding fare is really, really cheap. But my complaint is that the air at tram stations is choking...